Is technology sector in a bubble?

bachelor thesis

Tadej Kelc (Author), Sebastjan Strašek (Mentor)

Abstract

The thesis is dealing with the question if the U.S. technology sector is in the bubble. Besides the main aim of this thesis, we are also interested in what the changes are in recent stock market bubbles. The analysis of the sector is key to the investors, because with the early identification of a bubble, they can allocate their funds to other less risky investments. On the other hand, the investors can with the analysis of the sector find out if specific sector is undervalued and thus make above average revenue. Our analysis is based on the study of relative indicators, such as: P/E, P/B, CAPE, P/B, P/S and MarketCap/GDP. We studied the last two historic bubbles and analyzed the current state on the U.S. stock markets. The analysis is focused on the last part of the thesis, where we evaluated what is the current market sentiment in the U.S. stock market, especially in the technology sector. The results are compared to the technology bubble of 2000. In the analysis, we are using U.S. stock market indices as well as the global ones. U.S. stock market is overvalued, which can be argued with high values of the relative indicators compared to the historical average. Some of them show, that market was valued higher only during the Great Depression in 1929 and during the technological bubble in 2000. Remarkably high values are the result of low interest rates and quantitative easing of central banks. The current expansive monetary politics is encouraging risky businesses and increasing credit businesses. The indicator, showing this kind of operations, is the value of investment financed with credit, which is constantly rising in the U.S. since 2009. As a result, stocks and stock indices are increasing as well. With potential abatement of tax rates and other measures of expansive fiscal politics, stock markets could reach even higher values. Currently, we are in the ninth year of bull trend, which is close to the record of 1991, which lasted for nearly a decade. Since 2009, there is optimism prevailing in U.S. stock market, which is reflecting in above average revenue. The feature of the stock market bubble is that it is developing slowly and persistently, thus the main question arises, when will this optimism turn into fear and pessimism, or better said, when will the stock market bubble burst. Still, no one has the answer to that yet.

Keywords

stock market bubble;technology sector;overvalued;stock market;stock market index;dot.com bubble;housing bubble;

Data

Language:	English
Year of publishing:	2017
Typology:	2.11 - Undergraduate Thesis
Organization:	UM EPF - Faculty of Economics and Business
Publisher:	[T. Kelc]
UDC:	336.76
COBISS:	12926748
Views:	1311
Downloads:	78
Average score:	0 (0 votes)
Metadata:

Other data

Secondary language:	Slovenian
Secondary title:	Je tejnološki sektor v balonu?
Secondary abstract:	Pričujoča diplomska naloga obravnava vprašanje, ali je ameriški tehnološki sektor v balonu. Odgovor na to vprašanje je glavni namen te naloge, poleg tega pa nas zanima, kakšne so spremembe v nedavnih borznih balonih. Analiza sektorja je ključna za investitorje, saj lahko z zgodnjo identifikacijo balona pravočasno alocirajo svoja sredstva v druge, manj tvegane naložbe. Po drugi strani pa lahko investitorji s sektorsko analizo odkrijejo morebitno podcenjenost določenega sektorja in ustvarijo nadpovprečen donos. Naša analiza temelji na preučitvi relativnih kazalnikov P/E, P/B, CAPE, P/B, P/S, ter MarketCap/GDP. Preučili smo tudi zadnja dva zgodovinska balona in analizirali trenutno stanje na ameriških borznih trgih. V analizi se osredotočamo predvsem na zadnji del naloge, kjer ocenjujemo, kakšno je trenutno stanje na ameriških borznih trgih, in sicer predvsem v tehnološkem sektorju, nadalje pa ugotovitve primerjamo s tehnološkim balonom iz leta 2000. V analizi uporabljamo tako ameriške borzne indekse kot tudi globalne. Ameriški trg je precenjen, kar lahko argumentiramo z visokimi vrednostmi najpomembnejših indikatorjev v primerjavi z zgodovinskim povprečjem. Vrednosti najpomembnejših indikatorjev prikazujejo, da je bil trg vrednoten višje samo v času velike depresije leta 1929 in tehnološkega balona leta 2000. Izjemno visoke vrednosti so posledica nizkih obrestnih mer in kvantitativnega sproščanja centralnih bank. Trenutna ekspanzivna monetarna politika spodbuja tvegane posle in povečuje posle s kreditnim zadolževanjem. Indikator, ki prikazuje takšne posle, je vrednost naložb, financiranih s kreditom, ki pa v Ameriki od leta 2009 neprestano raste. Posledično rastejo tudi delnice in borzni indeksi. Z morebitnimi nižanji davčnih stopenj in raznimi drugimi ukrepi ekspanzivne fiskalne politike bi lahko borzni trgi dosegli še višje vrednosti. Trenutno smo v devetem letu bikovskega trenda, kar je zelo blizu rekorda iz leta 1991, ki je trajal kar deset let. Vse od leta 2009 na ameriških borznih trgih prevladuje optimizem, ki se odraža v nadpovprečnih donosih. Značilnost borznega balona je, da nastaja počasi in vztrajno, zato se pojavlja glavno vprašanje, kdaj se bo optimizem spremenil v strah in pesimizem oziroma kdaj bo borzni balon počil. Točnega odgovora na to vprašanje nima nihče.
Secondary keywords:	borzni balon;borzni indeksi;borzni trg;nepremičninski balon;tehnološki balon;analiza;
URN:	URN:SI:UM:
Type (COBISS):	Diploma project paper
Thesis comment:	Univ. v Mariboru, Ekonomsko-poslovna fak.
Pages:	[5] f., 53 str.
ID:	10863338